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New Zealand’s free trade agreement progress

18 December 2009

New Zealand has ended the year with a swathe of good news on the free trade agreement (FTA) front. 

After signing the Australia-NZ-ASEAN FTA (AANZFTA) earlier this year, New Zealand has gone on to conclude agreements with Malaysia (FTA dated 26 October 2009), the Gulf Cooperation Council (FTA dated 31 October 2009) and Hong Kong (Closer Economic Partnership Agreement dated 14 November 2009).  The latter two agreements have not been publicly released as they are still subject to ‘legal scrubbing’.  The Malaysia FTA contains better tariff line results for a significant range of products.  The key wins are in agriculture (particularly kiwifruit), although some quotas still remain (including for liquid milk products, hens’ eggs and pork meat); and manufactured goods.  The FTA also contains a services chapter which improves on the AANZFTA text (for instance in the education and environmental services sectors) and an investment chapter which improves marginally on the AANZFTA text.

Talks are also well underway with Pacific Island nations (the expanded Pacer Plus) and Korea (which concluded an FTA with the EU in October 2009), which should be a benchmark for the New Zealand negotiating team.  Korea’s main problem on the trade front has been in getting KORUS, its June 2007 FTA with the US, ratified by the US Congress (as a result, Korea has not ratified it either).  The problem is multi-faceted but has largely been caused by the fact that President Bush’s “fast track” authority expired on the same day the KORUS agreement was concluded.  Fast track authority is the institutional procedure by which Congress grants to the President the power to conclude free trade agreements, with Congress then having only the right to an “up” or “down” vote on the concluded deal.  Further renegotiation of KORUS now appears to be required, with particular focus on the automotive sector.  US FTAs with Panama and Colombia also remain unratified. 

This may be salutary for New Zealand’s own negotiations with the US through the Trans Pacific Partnership Agreement (the TPP), which is intended to be an expanded version of New Zealand’s P4 Agreement with Brunei, Singapore and Chile.  On 14 November 2009, President Obama declared in a speech in Tokyo that negotiations towards the TPP were back on track:

“The United States will also be engaging with the Trans-Pacific Partnership countries with the goal of shaping a regional agreement that will have broad-based membership and the high standards worthy of a 21st century trade agreement”. 

On the same date, US Trade Representative Ron Kirk formally notified Congress that:

“Our TPP negotiating partners currently include Australia, Brunei Darussalem, Chile, New Zealand, Peru, Singapore, and Vietnam.  These countries form an initial group of ‘like-minded’ countries that share a commitment to concluding a high-standard trade agreement.  US participation in the TPP Agreement is predicated on the shared objective of expanding this initial group to additional countries throughout the Asia-Pacific region.  Several already have expressed interest in potentially participating in the agreement….The TPP Agreement provides an opportunity to develop a new model for US trade negotiations and a new regional approach that focuses more on jobs, enhances US competitiveness, and ensures that the benefits of our trade agreements are shared with all Americans.  We look forward to working closely with you as we set US objectives and carry out negotiations to conclude this new important agreement.” 

The US is hoping that Japan, Malaysia and Korea will join the negotiations, which already include the P4 countries, Australia, Vietnam and Peru.  

We should expect these negotiations to take at least two years to conclude.  There is already press speculation that Obama will want to reach agreement by the time the US hosts APEC in Honolulu in 2011.  The big question remains, of course, how to ensure Congressional approval for any concluded deal.  Indeed, without an expectation of such approval, negotiations may not even progress in earnest.  Despite the intended close cooperation between the President and a Democratic Congress, it is difficult to see how ratification will happen absent a renewal of fast-track authority. 

The USTR has set up a website dedicated to the TPP negotiations, as has the New Zealand Ministry of Foreign Affairs and Trade

New Zealand also hopes to begin formal FTA negotiations with India during 2010. Agreement in principle to do so was reached in February 2009.